Blunkett says pension age could be raised to 67

By George Jones, Political Editor

The retirement age for people aged 40 or younger could be raised to 67 to tackle the pensions crisis, David Blunkett, the Work and Pensions Secretary, indicated yesterday.

Mr Blunkett, who has been visiting America and Canada to examine options for pension and benefit reforms, said that working longer would be one of the main ways of averting poverty in retirement.

The present retirement age of 60 for women is being raised by stages to 65, the age at which men retire. Delaying the state pension for two more years is likely to prove highly controversial and unpopular, although it would probably be paid at a higher rate.

Last week trades unions threatened that more than three million workers in schools, hospitals and town halls could strike if the Government raised their retirement age from 60 to 65.

The Government has proposed that, from 2013, public sector workers reaching 60 should have to wait five more years for their inflation-proof pensions, which is separate from the state pension. Ministers have proposed to delay this to 2018 but union leaders said that could lead to the worst industrial action since the 1926 general strike.

Mr Blunkett told BBC TV's Politics Show that America was committed to raising the retirement age to 67 over the next 20 years.

"That is the kind of debate we'll be having," he said.

There would be a debate about the balance between working longer, contributing more and expecting more in terms of quality of life.

A spokesman for Mr Blunkett stressed that it would be for the commission on pensions, headed by Adair Turner, a former head of the Confederation of British Industry, to recommend changes when it reports this year. Mr Turner wants to see greater flexibility in deferring pensions. He cited studies showing that, while men retiring at 65 and women at 60 received a basic state pension of £82, deferring it to 70 could allow payments to rise to £130.

Pensions, and the prospect that many people are not saving enough for retirement, has emerged as one of the most difficult domestic issues facing Labour during its third term in power.

Last month Mr Blunkett announced that he had abandoned the idea of offering an enhanced "citizen's pension" to everyone.